Page 59 - Kolte Patil AR 2019-20

Emerging trends during COVID-19
The novel coronavirus originated in
China and was declared as a global
pandemic on 11 March, 2020 by the
World Health Organization (WHO),
which was closely followed by a global
lockdown. The lockdown had a massive
impact on the world economy as well as
various sectors across the globe, include
real estate. However, it has also opened
up some opportunities for the real estate yyDemand for the affordable sector. According to the ANAROCK
have reduced them substantially due to economic uncertainty as a result of the lockdown
yyMajority of the buyers now favour risk-free investments. The demand for developers having the least execution risk is at an all-time high, even if the properties are higher priced.
yyBuyers looking for properties from
an investment perspective prefer ready-to-move-in (RTM) homes over under-construction ones due to the uncertainty regarding the resumption of construction activities across the nation
(Source: Financial Express)
affordability parameters indicate that once COVID-related issues recede, housing market volumes could expand over several years based on latent demand in a supply-deficient market.
equity and debt funding. However, the emerging trend of working from home and weak employment generation in a weak economy reduces the growth potential across the near to medium term. Lease rentals are expected to decline in this time frame.
NRI influx: There has been strong traction from NRI customers in the
last few months. Advanced digital tools like 360 degree project walk through have heightened the customer experience and allows meaningful time to research properties online. Recently, the number of expats leveraging the rupee depreciation versus dollar has increased. Most surveys indicate that real estate is still considered a top investment asset by Indians abroad. Further, given the mass job cuts in the US and Europe, their unemployment numbers have increased substantially; and this will lead to reverse migration to India. Going forward, NRI segment is expected to contribute increasingly towards sales.
Consumer Sentiment Survey, the following trends were noticed:
yyHome ownership has become a priority for the millennials after the outbreak of COVID-19 since physical
Improving affordability
Since 2013, real estate prices have underperformed the broader per-capita income growth as well as consumer price index. Interest rates on mortgages have also declined significantly to the lowest levels in several decades, which
housing segment has not decreased despite concerns over its target audience’s limited income and rising unemployment rate. In fact, buyers, who previously had higher budgets,
is also very favorable from buyers’ standpoint. The government is focusing on affordable and mid-income housing through an interest subvention scheme and tax breaks for developers of low ticket sized housing. These improved
Industry consolidation is the underlying theme
The Indian real estate industry is highly fragmented – however, following the cyclical downturn, government actions and legislative reforms, there is ample scope for consolidation to the benefit of strong developers capable of executing projects in a timely manner. Smaller players, with weak market position and leveraged balance sheets, are already finding it difficult to sustain. Overall, the residential real estate market may move in the same direction as the commercial property development market that sees a much higher market share for leading real estate brands coinciding with a much higher level of customer confidence.
Currently, within the framework of
the housing market in India, weak property prices, low apartment values and limited scale of market demand in smaller cities means that top developers confine their operations to a few top cities, which represent about 40%
of the overall market. The organised developers currently control <10% of overall market opportunity and ~15-
20% of the directly addressable market in Top cities. Structural improvements already in place should allow large developers to launch operations in more cities, as well as gain market share
in existing markets. (Source: Jefferies Equity Research Report)
Capital availability is a key differentiator: Weak demand, multiple disruptions and shrinking NBFC funding have shrunk the capital pie
for developers, extending the relative market potential for leading execution- focused players. Further, customers’ preference continues to gravitate to completed apartments, which increases the deployment of capital per unit of inventory and pushes back cash inflows from the sale transaction. Availability of capital at reasonable costs is therefore a key differentiator.
Weakness in lease rentals : The lease rental market in commercial real estate had previously trended higher based on supply being confined to few developers and supported by availability of private
assets provide the highest security in times of crisis,
yyFurther driven by all-time low rates of interest on home loans
yyBengaluru, Hyderabad and MMR witnessed the highest number of bookings just before and during the lockdown as a result of the developers placing extra emphasis on digital sales
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